The lost revenues would be replaced, in part, by increasing the state income tax from 2.8 percent to 3.75 percent. That would not affect most of the seniors, since Pennsylvania does not tax pension income.
Rendell said Pennsylvania ranks last among the 41 states that tax income. The increase, he said, would make the state 38th on the list.
The governor's plan, which includes legalizing slot machines at race tracks to raise another $300 million next year, would reverse a trend which has seen state funding of public schools drop from 55 percent in 1974-75 to 34 percent now.
He said the failure to raise state taxes in the past resulted in higher local taxes. Rendell said his proposal, which faces stiff challenges in the GOP-controlled House and Senate, would keep school property taxes in check, because any increase above the rate of inflation would have to be approved by referendum.
The reduction is not enough for one senior, Julius Bernhardt of Fayetteville, Pa. He asked why he should pay school taxes since "I haven't had any kids in school in 30 years."
"There's no free lunch," Rendell replied.
Rendell said he's open to other ideas for reducing property taxes, including a proposal for a 4 percent sales tax. The sales tax is now 6 percent, but excludes food and clothing.
He prefers raising income taxes "because we're the lowest in the country."
The governor also outlined his plans to expand the PACE and PACE/NET prescription drug plans, in part by increasing lottery ticket sales from the $1.9 billion sold last year. That includes putting automated machines in chain stores that don't sell tickets because of personnel costs.
The use of more generic drugs and other cost-containment measures are also part of his plan.
Pennsylvania is one of 13 states with a prescription drug program, but Rendell said participation has fallen from 450,000 people in 1989 to 199,000 now because cost-of-living increases have made many people ineligible.
The governor proposes expanding income eligibility for PACE to $22,000 for single seniors and $30,000 for a couple. For PACE/NET users, the $500 deductible would be reduced to $480 and be paid in 12 installments rather than a lump-sum at the beginning of each year.
William McLaughlin, a Republican and a Chambersburg councilman, said he was generally supportive of Rendell's plans for reducing property taxes, by one method or another.
"I think there's a way to do it. It's just a matter of getting enough votes for a single program," he said.
The Rev. Charles A. Price, pastor of the St. Thomas United Church of Christ and a senior citizen, took issue with some of Rendell's proposals to raise revenues.
"Doesn't anybody even think of gambling as a moral issue?" he asked.